California Senate Passes Aftermarket Parts Bill

The California “Aftermarket Parts” bill (S.B. 1059) was passed last week by the California Senate Judiciary Committee. The legislation, as introduced, would have made it an unfair claims practice for an insurance company to require the installation of any aftermarket part on a vehicle when it is under a factory warranty, considering such a practice to be an unfair method of competition and a deceptive act in the insurance business. However, the committee voted during the hearing to amend the bill such that: "At the time of sale, the insurer shall specifically notify the insured whether the insurance contract allows for the use of aftermarket parts, and that such use may affect the insured's vehicle manufacturer's warranty. The required use of aftermarket parts must also be clearly and conspicuously disclosed in bold type in the front declaration page of the policy."

From AAIA Capital Report

WASHINGTON, D.C. — The California “Aftermarket Parts” bill (S.B. 1059) was passed last week by the California Senate Judiciary Committee. The legislation, as introduced, would have made it an unfair claims practice for an insurance company to require the installation of any aftermarket part on a vehicle when it is under a factory warranty, considering such a practice to be an unfair method of competition and a deceptive act in the insurance business. However, the committee voted during the hearing to amend the bill such that: "At the time of sale, the insurer shall specifically notify the insured whether the insurance contract allows for the use of aftermarket parts, and that such use may affect the insured’s vehicle manufacturer’s warranty. The required use of aftermarket parts must also be clearly and conspicuously disclosed in bold type in the front declaration page of the policy."

The Automotive Aftermarket Industry Association and other aftermarket groups continue to oppose the bill, pointing out that the bill would reduce competition for parts sold by the motor vehicle manufacturers (leading to an increase in the price of replacement parts) and drive up the cost of insurance claims. In addition, aftermarket groups have pointed to the fact that the bill is contrary to federal warranty law known as the Magnuson-Moss Warranty Act, which prohibits the conditioning of a warranty on the use of any original equipment part. The bill will now go to the Senate Appropriations Committee for consideration of financial impact to the state before a possible full Senate vote in May.